Browsing by Author "Mehnaz L"

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    Covenant violation concern and investors’ pricing of Level 3 fair value adjustments
    (Elsevier B.V., 2023-12-01) Mehnaz L; Rahman A; Kabir H
    We examine the influence of concerns relating to violation of the borrowing covenant on the investors’ valuation of Level 3 fair value adjustments. We reason that managerial bias in Level 3 fair value estimation is greater for firms approaching violation of the borrowing covenant. Based on a sample of Australian real estate firms, we find that managers report upward adjustments to Level 3 investment property values when they approach the threshold where the borrowing covenant is violated; and further find that this deliberate use of discretion is significant for firms closer to the interest coverage thresholds, but not for those approaching the gearing thresholds. We then find that, while fair value adjustments are priced positively, investors apply incremental discounts for firms closer to the violation threshold, or firms which are in technical default of borrowing covenants relative to those that are far from violation. Additionally, we show that the pricing discount on fair value adjustments attributable to the concern over covenant violation is significant only for the weaker governance sub-sample, indicating that effective monitoring mitigates faithful representation concerns about Level 3 fair value estimations.
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    The Disclosure of Recognised and Unrecognised Intangibles: Evidence from New Zealand
    (John Wiley and Sons Australia, Ltd on behalf of CPA Australia, 2024-05-26) Mehnaz L; Scott T; Zang Z
    We examine the reporting of intangible assets and the disclosures on intellectual capital activities by listed companies and public benefit entities in New Zealand and assess the usefulness of these disclosures. Comparing trends in intangible asset disclosure frequency, we note that the most common is capitalised software costs, followed by goodwill. For intellectual capital, we find that qualitative disclosures are more prevalent than quantitative, with disclosure on relational capital being the most frequent. In addition, we find that intangible assets are value relevant, and more intellectual capital disclosures increase the value relevance of goodwill. Finally, we consider intangible reporting by public benefit entities and show that while the rate of intangibles capitalised is similar, they are of less relative economic importance. Overall, our findings provide evidence of divergence in intangible categorisation practice, highlight the absence of reporting digital technologies and call for improved disclosure criteria for recognised and unrecognised intangibles.